Search - consideration

You have requested our comments whether losses arising from loan guarantees given by the above corporations on behalf of a U.S.A corporation which they together control, for no (or inadequate) consideration, would be deemed to be nil by subparagraph 40(2)(g)(ii) of the Income Tax Act (the “Act”) on the basis that the guarantees were not given for the purpose of gaining or producing income. ... Accordingly, in our view the losses of XXX would be deemed nil under the provisions of subparagraph 40(2)(g)(ii) of the Act because they arose from guarantees given for no (or inadequate) consideration and would not be permitted by virtue of the administrative exception set out in paragraph 6 of IT-239R2 because the guarantees were given on loans to a U.S. company. ...

The characterization of the SAR will become more important where the lender is a non-resident, as withholding tax considerations may arise. ... With respect to withholding tax considerations, we again would have to review specific documentation. ...

Consideration of this matter is not yet complete, however.  As indicated during the Round Table discussion, the Department currently considers that the income tax treatment of original-issue discount is ultimately a question of fact.  ... The comments in this letter are of general nature only and do not take into account considerations that might arise in connection with a specific transaction or event.  ...

You are of the view that the consideration of such amounts would be consistent with the approach taken by the Federal Court of Appeal in Youngman vs. ... In the case of artwork, antiques or any other luxury property it may be very difficult to find a fair market rental value which could be used in the determination of the shareholder benefit and, as stated in our response to question 33 at the 1987 Revenue Canada Roundtable, the benefit may have to be determined using a normal rate of return on the greater of the cost or fair market value of the property, plus the related operating costs, less any consideration paid to the corporation by the shareholder.  ...

The problem had been referred to the Department of Finance for their consideration and Finance has requested that paragraph 20(1) (p) is to be applied to permit a deduction only for that portion of the bad debt that "say reasonably be regarded as applicable" to the portion of the total proceeds that were originally included in computing the taxpayer's income. The Department will ad sinister the present law in a manner that would permit a bad debt deduction only for an amount equal to: Bad Debt x Deemed Proceeds------------------------------------------- Total Proceeds Furthermore, a deduction on account of a capital loss arising from the sale of goodwill is not permitted by virtue of subparagraph 39(1) (b)(ii), unless the capital loss aria" from a debt which was received as consideration for the disposition of goodwill and was acquired for the purpose of gaining or producing income from a business or property. ...

The situation in question involves the sale of a rental property in 1981 for sales consideration that included the assumption by the purchaser of an existing mortgage on that property. ... For purposes of subparagraph 40(2)(g)(ii) of the Act, it is our view that the acceptance of a new mortgagor (the subsequently defaulting purchaser in this case) by the mortgagee so as to enable completion of the sale by the vendor (owner) would constitute adequate consideration given to, and received by, the vendor (owner) in respect of the above guarantee. ...

It can be said that the shares have, been issued for consideration equal to the amount received and accordingly the amount received should be included in the paid up capital. On the other hand, it can be argued that the increase in paid up capital should be the fair market value of the shares at the date of issue on the basis that the difference between the fair market value and the consideration received was effectively received by the company as the value of the services contributed by the employee and accordingly should also be included in paid up capital". 2. ...

Ahmed (613) 957-2092 Dear Sirs: Re: Subsections 85(1) and 86(1) of the Income Tax Act (the "Act") This is in response to your request for a technical interpretation contained in your letter of January 26, 1989, wherein you requested our views as to whether the provisions of subsection 85(i) of the Act would apply where a taxpayer disposes of shares of a taxable Canadian corporation to that corporation for consideration which includes shares of the capital stock of the corporation and the taxpayer and the corporation jointly elect in prescribed form to have the provisions of subsection 85(1) of the Act apply thereto. ... Opinions In our view, the provisions of subsection 85(1) of the Act apply in the case where a taxpayer transfers shares of a taxable Canadian corporation to that corporation and receives newly issued shares of the corporation as consideration therefore provided that the transferor and transferee file the prescribed form within the time limits specified in subsection 85(6). ...

Consideration to be received by the individual in respect of this rollover will consist of the following: (a) a promissory note for an amount which exceeds the taxpayer's adjusted cost base of the partnership interest; (b) one common share with a paid-up capital of $1.00. 4. ... If the fair market value of the transferred property exceeded the fair market value of the aggregate consideration received by the transferor, paragraph 110.6(7)(b) would deny the subsection 110.6(3) deduction to the transferor. ...

Bailey 957-2061 19(1) July 2, 1990 Dear Sirs: This will reply to your letter of June 7, 1990 requesting our views on the tax consequences to a Canadian farmer of the receipt of proceeds from the granting of a right of access and easement to his vineyard and the receipt of consideration for permanent damages to his vineyard as a result of an underground gas pipeline constructed under the right of way. ... Therefore the consideration received by him for the right of access and easement would be an amount described in subparagraph 14(5)(a)(iv). ...